U.S. Business Executives Temper Strong Optimism on Economy, AICPA Survey Finds

Business executives are taking a more conservative view of what had been bullish optimism about both the U.S. economy and prospects for their own companies earlier this year, according to the second-quarter AICPA Economic Outlook Survey, which polls CEOs, CFOs, controllers and other CPAs in U.S. companies who hold executive and senior management accounting roles.

Those who expressed optimism about the 12-month outlook for the U.S. economy dropped from 69% last quarter – a 13-year high for the survey – to 64%. Respondents also pulled back slightly on optimism about their own company’s prospects (66% to 64%, quarter over quarter) and their organization’s plans for expansion (67% to 64%). Optimists and pessimists alike noted more uncertainty in the economic climate.

On the hiring front, some 40% of business executives said they had too few employees. Nearly one-in-four (24%) said they planned to hire immediately, a significant improvement from the 19 percent expressing that view a year ago. Another 16 percent said they need more staff, but were hesitant to hire.

There is a growing perception of tightness in the labor market. Asked to list their top challenges, business executives put “availability of skilled personnel” at No. 2 on the list and “staff turnover” at No. 6. Those categories were No. 3 and No. 9, respectively, last quarter.

The AICPA survey is a forward-looking indicator that tracks hiring and business-related expectations for the next 12 months. As a point of comparison, the U.S. Department of Labor’s May employment report, looks back on the previous month’s hiring trends.

Other key findings:

  • 16% of business executives said they expect the Trump administration’s proposal to lower federal corporate income taxes will be signed into law this year, while another 33% expect it to be enacted before the 2018 midterm elections.
  • 24% of business executives said a reduction in the rate of federal corporate income taxes to the 15-20% range would be “significantly positive” for their company’s bottom line, compared to 18% last quarter. Overall, 60% said a lower tax rate would be positive to some degree, compared to 51% last quarter.
  • The top category for investment of potential tax savings from a corporate rate reduction is increased capital expenditures (46%).
  • Revenue and profit expectations for the coming year fell, quarter over quarter. Business executives now expect revenue growth of 3.9% over the next 12 months, down from 4.3%. Profits are expected to grow 3.2%, down from 3.5% last quarter.

IT remains the strongest category for planned spending over the coming year, with an expected growth rate of 3.2%.